Glossary > Pump and dump scheme

Pump and dump scheme

What is a pump and dump scheme?

A pump and dump scheme is an illegal technique that artificially increases the price of an asset. The first step for fraudsters (the pump) is to buy large quantities of the asset. This will lead others to buy as well thinking that they would miss an opportunity by not doing so.

The second step (the dump) takes place when the fraudsters sell all their assets making important profits in the process. At this point, the price of the asset plummets and leaves other investors with low-valued assets.

This scheme is used for cryptocurrencies as well. Fraudsters often use Telegram or Discord channels to promote an asset or an ICO and carry out their scheme for example.